Financial Accounting
ACCTG 311 A1 THE UNIVERSITY OF AUCKLAND ACCTG 311 FC 2021 Assignment ONE – Revision of ACCTG 102 and 211 Questions and Answer Booklet DUE Date: Wednesday 10 March at 4pm, Total = 60 marks (worth 4%) Last Name: Student AUID First Names: Assignment Submission Instructions An electronic version of your assignment must be submitted on Canvas by the due time. LATE Assignment will NOT be accepted for marking by Canvas. 1) Answers must be TYPED into this Answer booklet including calculations and relevant workings. You are able to add extra pages if required to show extra workings. 2) Save your assignment as ONE Single WORD file. 3) Rename your assignment file to your last name, followed by a comma and your first name. For example, Smith, Kate (the last name is Smith and the first name is Kate). 4) Upload the file on Canvas by going to Assignments, then click on Assignment 01. You will see the “Submit Assignment” button on the right-hand side of the webpage. A message box will appear, and click on “Choose File” button to locate your assignment file, which you renamed in the above steps and click OK. Finally click the “Submit Assignment” button in the new message box to submit your file. 5) After submission, open the file on Canvas to make sure that a complete version of your assignment answers is viewable on Canvas. Note: you can only submit one WORD file per person. If you want to replace the existing file, simply repeat step 4 above. You can do this any time BEFORE 4pm on the due date. Canvas will NOT allow any assignment submission after 4pm on the due date. 1. Accounting transactions and financial statements (40 marks) Ashley Happiness is a small business selling variety of premium body oils. The balance sheet at the end of December 2020 is shown below. Ashley Happiness – Balance Sheet as at 31 December, 2020 Assets Liabilities & Owner’s Equity Current Assets: Current Liabilities: Cash $40,000 Accounts Payable $9,000 Accounts Receivable $25,000 Inventory $21,000 Non-current Assets: Non-current Liabilities: Office equipment – Cost $5,000 Bank Loan $50,000 Less Accumulated Depreciation ($1,200) Office equipment – Net $3,800 Owner’s Equity: Share Capital $20,000 Retained Earnings $10,800 Total Assets $89,800 Total Liab’ & OE $ 89,800 Required: 1. Transactions for January 2021 are given below (ignore taxes). Prepare journal entries to account for these transactions, and indicate the impact on the Cash Flow Statement if there is any. The first transaction is done for you in the template as an example. (24 marks) (i) 1 January, collected $10,000 cash from accounts receivable. (ii) 1 January, prepaid rent $24,000 for the next 12 months. (iii) 1 January, paid $5,000 of accounts payable, which related to inventory purchased in 2020. (iv) 2 January, repaid part of the bank loan $20,000. (v) 5 January, sold one piece of office equipment for $550 cash. The disposed equipment has a cost of $1,000 and accumulated depreciation of $150. (vi) 7 January, purchased $15,000 of inventory on credit, which is payable in February 2021. (vii) 8 January, sold $11,000 worth of inventory for $23,000 cash. (viii) 20 January, paid employee monthly salary of $4,000. (ix) 22 January, paid other expenses $800 including power, water, internet and phone, for the month. (x) 26 January, sold $8,000 worth of inventory for $14,000 on credit, receivable in February 2021. (xi) 30 January, a customer ordered some premium body oils and paid a deposit of $1,500. The delivery of the order will take place in March 2021. (xii)31 January, the following adjustments needed to be recorded: · Accrued interest expense $400 for the month of January, which is payable in February 2021. · Depreciation expense $250 for office equipment in January. · Rental expense for the month of January. Q1(a)Template for Journal Entries: Date Dr Cr Dr $ Cr $ Note: (i) 1-Jan Dr Cash 10,000 Cash inflow from operating Cr Accounts Receivable 10,000 (ii) 1-Jan (iii) 1-Jan (iv) 2-Jan (v) 5-Jan (vi) 7-Jan Q1(a) Template for Journal entries continued: Date Dr Cr Dr $ Cr $ Note: (vii) 8-Jan (viii) 20-Jan (ix) 22-Jan (x) 26-Jan (xi) 30-Jan (xii) 31-Jan Q1 Continued: 1. Prepare the following THREE financial statements, using the templates below: · Income Statement for the month of January 2021, · Statement of Cash Flows for the month of January 2021, · Balance Sheet as at 31 January 2021. (hint: you need to work out the closing balance of each asset, liability and owner’s equity, which includes opening balance and the change during the current financial period. You can either use the formula or T-account to work out the balance.) (16 marks) Ashley Happiness Income Statement for the month of January 2021 Revenue Less Cost of Goods Sold = Gross Profit Less Other Operating Expenses and Losses Total Other Operating Expenses and Losses Profit Workings Q1 (b) Continued: Ashley Happiness Statement of Cash Flows for the month of January 2021 Operating Cash Flows Receipts from customers Payment to inventory suppliers Payment for rent Payments for salary and other expenses Total Operating Cash Flows Investing Cash Flows Receipt from disposal of non-current assets Total Investing Cash Flows Financing Cash Flows Loan repayment Total Financing Cash Flows Net change in cash held during January + Opening Cash Balance from 31 Dec 2020 = Closing Cash Balance on 31 Jan 2021 Workings Q1(b) Continued: Ashley Happiness Balance Sheet as at 31 January 2021 Assets $ Liabilities and Owner’s Equity $ Current Assets: Current Liabilities Non-current Assets: Non-current Liabilities: Owner's Equity Total Assets Total Liab' & OE Workings Q1(b) Continued: Workings 2. True (T) or False (F) statements (20 marks) You are provided the financial information and statements below for the year ended 31 March 2021 for Sunny Ltd. Using the template provided below, indicate for each of the statements whether it is True (T) or False (F). If the statement is false, rewrite the statement to make it true, otherwise leave it blank. Item Financial information and related statements T / F (a) Financial Information: On 1 April 2020, the opening balance of the provision for warranty was $15,000. At the end of the financial year, $25,000 has been paid out for warranty claims. On 31 March 2021, the Balance Sheet shows a liability “Provision for warranty” with a closing balance of $50,000. Statement: Therefore, during the financial year, Sunny Ltd recognised $25,000 for its warranty expense in the Income Statement. Rewrite statement: (b) Financial Information: On 1 April 2020, the opening balance of the land was $900,000. The land is measured at cost. During the year, a piece of the land was sold for $300,000 cash, and there was a gain on sale of $60,000. Statement: Therefore, on 31 March 2021, the Balance Sheet has an asset “Land” with a value of $600,000, and the asset “Cash” balance goes up by $300,000. Rewrite statement: (c) Financial Information: On 1 April 2020, the opening balance of the prepayment for insurance was $20,000. During the year, Sunny Ltd recognises $35,000 “Insurance expense” in the Income Statement. On 31 March 2021, the Balance Sheet has an asset “Prepayment for insurance” with a value of $25,000. Statement: Therefore, for the year ended 31 March 2021, Sunny Ltd has paid out $35,000 cash for the insurance. Rewrite statement: Q2 continued: Item Financial information and related Statements T / F (d) Financial Information: On 1 April